Publication Library
Probability Theory and Examples - Durrett
Description: Probability: Theory and Examples - Rick Durrett
Created At: 14 December 2024
Updated At: 14 December 2024
VARIATIONAL BAYES PORTFOLIO CONSTRUCTION
Description: Portfolio construction is the science of balancing reward and risk; it is at the core of modern finance. In this paper, we tackle the question of optimal decision-making within a Bayesian paradigm, starting from a decision-theoretic formulation. Despite the inherent intractability of the optimal decision in any interesting scenarios, we manage to rewrite it as a saddle-point problem. Leveraging the literature on variational Bayes (VB), we propose a relaxation of the original problem. This novel methodology results in an efficient algorithm that not only performs well but is also provably convergent. Furthermore, we provide theoretical results on the statistical consistency of the resulting decision with the optimal Bayesian decision. Using real data, our proposal significantly enhances the speed and scalability of portfolio selection problems. We benchmark our results against state-of-theart algorithms, as well as a Monte Carlo algorithm targeting the optimal decision.
Created At: 14 December 2024
Updated At: 14 December 2024
Predicting Country Instability Using Bayesian Deep Learning and Random Forest
Description: Country instability is a global issue, with unpredictably high levels of instability thwarting socioeconomic growth and possibly causing a slew of negative consequences. As a result, uncertainty prediction models for a country are becoming increasingly important in the real world, and they are expanding to provide more input from 'big data' collections, as well as the interconnectedness of global economies and social networks. This has culminated in massive volumes of qualitative data from outlets like television, print, digital, and social media, necessitating the use of artificial intelligence (AI) tools like machine learning to make sense of it all and promote predictive precision [1]. The Global Database of Activities, Voice, and Tone (GDELT Project) records broadcast, print, and web news in over 100 languages every second of every day, identifying the people, locations, organisations, counts, themes, outlets, and events that propel our global community and offering a free open platform for computation on the entire world. The main goal of our research is to investigate how, when our data grows more voluminous and fine-grained, we can conduct a more complex methodological analysis of political conflict. The GDELT dataset, which was released in 2012, is the first and potentially the most technologically sophisticated publicly accessible dataset on political conflict.
Created At: 14 December 2024
Updated At: 14 December 2024
A Fully Analog Pipeline for Portfolio Optimization
Description: Portfolio optimization is a ubiquitous problem in financial mathematics that relies on accurate estimates of covariance matrices for asset returns. However, estimates of pairwise covariance could be better and calculating time-sensitive optimal portfolios is energy-intensive for digital computers. We present an energy-efficient, fast, and fully analog pipeline for solving portfolio optimization problems that overcomes these limitations. The analog paradigm leverages the fundamental principles of physics to recover accurate optimal portfolios in a two-step process. Firstly, we utilize equilibrium propagation, an analog alternative to backpropagation, to train linear autoencoder neural networks to calculate low-rank covariance matrices. Then, analog continuous Hopfield networks output the minimum variance portfolio for a given desired expected return. The entire efficient frontier may then be recovered, and an optimal portfolio selected based on risk appetite.
Created At: 14 December 2024
Updated At: 14 December 2024
AN ANALYTIC SOLUTION FOR ASSET ALLOCATION WITH A MULTIVARIATE LAPLACE DISTRIBUTION
Description: In this short note the theory for multi-variate asset allocation with elliptically symmetric distributions of returns, as developed in the authors prior work, is specialized to the case of returns drawn from a multi-variate Laplace distribution. This analysis delivers a result closely, but not perfectly, consistent with the conjecture presented in the author’s article Thinking Differently About Asset Allocation. The principal differences are due to the introduction of a term in the dimensionality of the problem, which was omitted from the conjectured solution, and a re-scaling of the variance due to varying parameterizations of the univariate Laplace distribution.
Created At: 14 December 2024
Updated At: 14 December 2024